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| - The OPEC group of oil producers and its allies began talks on Thursday with all eyes on whether powerhouses Russia and Saudi Arabia can agree on output levels as global demand remains fragile. The so-called OPEC+ group sharply cut output last year to counter a sudden plunge in prices caused by the coronavirus pandemic, but it agreed to gradually increase supply in January. Now that vaccination campaigns are underway and demand from top oil importer China has bounced back to pre-pandemic levels, the key question will be whether heavyweights Russia and Saudi Arabia find common ground again. Moscow is said to be keen to turn on the taps again but Riyadh prefers to keep the status quo. Oil prices surged more than five percent hours after the meeting started on speculation that the group would keep a tight lid on production. "I know everybody is anxious to see what we will do," Saudi Energy Minister Prince Abdelaziz bin Salman said at the start of the closed-door meeting. "The uncertainty surrounding the pace of recovery has not receded," he said. "At the risk of sounding like a stuck record - I would once again urge caution and vigilance." For his part, Russian Deputy Prime Minister Alexander Novak said "the market has not yet fully recovered", but that "we are now in a much better shape and state of the market than we were just a few months ago". While the differences between Riyadh and Moscow were not as visible during almost a year of lower prices, the return of prices close to pre-pandemic levels -- around 65 euros per barrel -- threatens to revive tensions. The speed at which demand will return remains subject to several factors, not least the success of vaccination programmes which have got off to a shaky start in some countries. The International Energy Agency (IEA) warned in its last monthly report in February that the rebalancing of the market was still "fragile" and that coronavirus variants could represent a risk to recovery. During the January meeting, the alliance of 23 oil exporters needed two tough days of talks to agree to gradually increase supply. While 7.125 million barrels per day (bpd) were withheld from the market in February, the cartel lowered that figure to 7.05 million bpd for March, supplying the market with an additional 75,000 bpd. Experts had predicted that OPEC+ would agree to release another 500,000 bpd in April at Thursday's meeting. In addition, Saudi Arabia could flood the market with an extra one million bpd if it decides to drop an extra production cut it voluntarily took on to facilitate the initial agreement and allow Russia and Kazakhstan to increase their own production. Iran, Venezuela and Libya have been exempt from OPEC's quotas, while countries like Iraq and Nigeria have produced above quota for months, flouting the cartel's agreement. OPEC members are also monitoring any signs that US President Joe Biden might lift sanctions on Iran, which would allow Tehran to re-enter the global market and dramatically increase supply. bp/anb/jsk/lth
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